Commitments of Traders Report - COT
The Commitments of Traders Report (COT) is a weekly update on contract open interest published by the U.S. Commodity Futures Trading Commission (CFTC). It is one of Wall Street’s finest examples of availability bias, as it is one of the few pieces of information that provides any level of data on speculation and hedging by funds in the futures markets, and by how many contracts they are “long” or “short” on specific commodities.
Many believe that it offers a correlation between managed money positions and commodity prices. However, it’s highly inconsistent, offers readers a sense of false confidence, and might as well as well be written by mole people, since their heads are also underground, like CFTC regulators.
Like all things on Wall Street, the COT is easily rigged, and has been manipulated by large investment firms, because no independent audits of the numbers typically take place. In 2014, J.P. Morgan paid a fine to the CFTC for falsely reporting “large trader” data. You probably didn’t notice, because banks are constantly paying fines for market manipulation or fraud. Or...because you were at the movies, or something.
Many large investment banks and smaller advisories with commodity desks publish a weekly analysis of COT data for clients for two reasons. 1) The raw report from the CFTC is almost impossible to understand, and 2) the banks need to make it look like they’re actually doing work so that their clients don’t pull their money from their funds.
These client reports include tables and charts that are recreations of government charts in the banks’ color schemes and logos, again to justify the existence of a junior analyst’s job and to keep him at work long enough so that he can take a car home on behalf of the investment bank’s account.
The COT report dates back to 1924, when the USDA began publishing hedging data. It became a monthly report in 1962, bi-monthly report in 1990, fortnightly report in 1992, and weekly report in 2000. Reports for the previous week’s data are completed on Tuesday, and released to the public on Fridays, which makes little sense given the fact that we can get instant trading data 24 hours a day from a satellite in the sky. But...that’s our government at work.